Oil and petroleum prices have erased all signs of losses after gaining as Iran keeps oil traders on their feet.
Crude oil WTI futures have risen 1.76% or 0.98 points. Prices of the light sweet crude oil in today’s trading range from $55.57 to $57.02. Crude oil barrels currently trade at $56.35 compared to its previous close of $55.63.
Brent oil futures are also trading in the positive territory in today’s session. Brent oil gained 1.17% or 0.75 points. A barrel of Brent oil presently trades at $63.23 against its last close of $62.47.
Oil traders are worried about the potential impact on oil demand from the brewing tensions in the Middle east.
Prices of oil and petroleum products have surged following the seizure of a British oil tanker. On Friday, Iran reportedly captured an oil tanker with a British flag in the Strait of Hormuz.
The state-run media in Iran said that the oil tanker violated international regulations. However, the exact violation and reason for Tehran’s sudden capture of the British-owned ship are still unclear.
The geopolitical tension in the Middle East was further intensified last month after United States President Donald Trump said that they shot down an Iranian drone.
Just last week, the US president again claimed that the US Navy brought down another Iranian drone. Trump said that the drone flew nearby the USS Boxer and had ignored calls from the Navy.
He added that the drone was threatening the Navy ship and the crew onboard.
Tehran later dismissed the news. A spokesperson from the Armed Forces of Iran said that all of the Iranian drones returned safely to their respective bases.
The failure of both economic giants to come up with a resolution for a truce has also taken its toll on oil and petroleum prices. Continued concerns were said to be a catalyst for selling oil.
Trade negotiations are expected to take place via a phone calls from the US and Chinese representatives last week. If both sides come out with a positive stance, the representatives from the United States are set to travel to China to personally negotiate.
Last week, the US president said that the negotiation might take time and will not happen right away. Trump also added that he is currently considering giving heavier tariffs against China.
Analysts of oil, petroleum, and other commodities are saying that the tension in the Middle East will not give a wild surge on oil prices.
According to an analyst, the market and oil prices did not react as much as it has done in previous conflicts. According to her, there are two main factors as to why oil prices are being held from further surging.
First is the sudden shift of crude oil production in the United States. The use of oil tracking technology has boosted up oil production in the US.
In the past, Russia and Saudi Arabia were the two most prominent oil producers in the world. The United States has surpassed those giants, claiming the top spot for oil productions.
Oil production in the United States has helped lighten the volatility of oil price swings.
The second factor is the weakening global oil demand. The US-China trade has caused the world economy to slow down, and oil demand forecasts are expecting oil demand to drop in 2019.
The Energy Information Administration report showed data of an oversupply in global crude markets. The imbalance of supply and demand is keeping oil prices grounded.